Share and share alike

The law of implied, resulting and constructive trusts has become increasingly important in recent times, as the number of cohabiting, unmarried couples has grown and the cost of housing has risen sharply. Often, unmarried couples buy a house 'together' without any understanding of the distinction between legal and equitable interests and without any firm, let alone expressed, intention as to how ownership should be divided in the event of their breaking up.

Furthermore, research suggests that a majority of cohabiting couples wrongly think that they are, after a time, in a 'common law marriage' '“ treated for all purposes by the law as if they are married (or civil partners).

Lack of statutory remedies

In July 2007, the Law Commission published a report, Cohabitation: The Financial Consequences of Relationship Breakdown, (the Report') which found that the current law was considered complex, uncertain, expensive to rely on and often gave rise to unjust outcomes. The lack of specific statutory remedies between cohabiting parents on separation was thought to hamper the effectiveness of the courts' powers to make financial orders for the benefit of children under s 1 of the Children Act 1989 and the social consequence of the current law was all too often, the Commission concluded, hardship for many cohabitants on separation and, as a consequence, for their children.

Results from the British Social Attitudes survey suggest that a substantial majority of people in England and Wales think that cohabitants should have access to financial relief on relationship breakdown.

The report proposed a scheme for financial relief for cohabitants on relationship breakdown which should apply in the following, limited circumstances: the couple were eligible by reason of having a child together or having lived together for a specified number of years; they had not agreed to disapply the scheme; and the applicant for relief under the scheme must be able to prove that they have made qualifying

contributions to the parties' relationship which have given rise to certain enduring consequences at the point of separation (the applicant would have to show that the respondent retained a benefit or that the applicant had a continuing economic disadvantage, as a result of contributions made to the relationship). The value of any award would depend on the extent of the retained benefit or continuing economic disadvantage. The courts would have discretion to grant financial relief and in doing so would be required to give first consideration to the welfare of any dependent children (and usually, in consequence, to their primary carer).

These proposals have been considered and shelved and it seems unlikely that they will receive much attention from the present government, given its circumstances.

Law of trusts of land

In the absence of legislation, the courts have been developing the law of trusts of land in the context of cohabitation. In Hiscock v Oxley [2004] EWCA Civ 546; (2004) 2 FLR 669, Chadwick LJ devised the formulation that, where the extent of the parties' respective interests in a property could not be

determined by evidence of what they said and did at the time of its acquisition, then each party was entitled to 'that share which the court considers fair having regard to the whole course of dealing between them in relation to the property'.

He went on to say that this 'includes the arrangements which they make from time to time in order to meet the outgoings...which have to be met if they are to live in the property as their home'.

Hiscock v Oxley was a case where the property was held in the sole name of one of the parties. It was followed by Stack v Dowden, a case in which the property in dispute was held in both parties' names, in which Chadwick LJ reiterated the principles set out in Hiscock v Oxley and applied them to the joint names scenario.

The House of Lords' judgment in the case ([2007] UKHL 17) has been the subject of considerable debate. The leading opinion of Baroness Hale set out to re-establish the primacy of the maxim that equity follows the law: 'The burden will. . . be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way. This is not a task to be lightly embarked upon . . . A full examination of the facts is likely to involve disproportionate costs. In joint names cases it is also unlikely to lead to a different result unless the facts are very unusual.'

Baroness Hale gave a long list of factors other than financial contributions which may be relevant to divining the parties' true intentions, concluding that 'this is not, of course, an exhaustive list'.

She then said: 'When a couple are joint owners of the home and are jointly liable for the mortgage, the inferences to be drawn from who pays for what may be very different from the inferences to be drawn when only one is owner of the home. The arithmetical calculation of how much was paid by each is also likely to be less important. It will be easier to draw the inference that they intended that each should contribute as much to the household as they reasonably could and that they would share the eventual benefit or burden equally. The parties' individual characters and personalities may also be a factor in deciding where their true intentions lay. In the cohabitation context, mercenary considerations may be more to the fore than they would be in marriage, but it should not be assumed that they always take pride of place over natural love and affection. At the end of the day, having taken all this into account, cases in which the joint legal owners are to be taken to have intended that their beneficial interests should be different from their legal interests will be very unusual.'

Stack v Dowden is 'very unusual'

The Lords found that Stack v Dowden was one of those 'very unusual' cases in which the parties' beneficial interests should be different from their legal interests, awarding Mr Stack a beneficial interest of

35 per cent as against Ms Dowden's 65 per cent (and thus affirming the decision of the Court of Appeal on different grounds).

The way in which this conclusion was reached was somewhat opaque, but it appeared to bear some resemblance to the resulting trust method, in spite of the earlier part of the judgment apparently suggesting that this was now heretical.

Fowler v Barron [2008] EWCA Civ 377, was the first joint names case to reach the Court of Appeal following the House of Lords' judgment in Stack. The parties owned the disputed property in joint names and they had been jointly and severally liable for the mortgage, but Mr Barron had put down the deposit, made all of the mortgage

repayments and paid all the outgoings in relation to the property. Miss Fowler, meanwhile, had paid for 'optional expenditure', the trial judge found, mainly for herself and the parties' two children. The trial judge applied a resulting trust, giving Mr Barron a 100 per cent beneficial interest in the property.

Lady Justice Arden, giving the leading judgment in the Court of Appeal, summarised the important points decided by the House of Lords in Stack as follows: 'The legal technique that the court will use to ascertain whether both joint owners who had been cohabitees had a beneficial interest is that of the common intention constructive trust, rather than that of the resulting trust. This will enable the court to take a holistic view of the whole of the parties' conduct so far as it illumines their shared intentions about the ownership of the property. The court will not impose any particular allocation of property on the parties. It is not a question of the court deciding what is fair as regards the division of ownership but of determining what the co-owners' shared intentions were as regards beneficial ownership. This was a deliberate policy choice to make the law respond to current needs.'

Arden LJ also said that: 'For the purpose of determining the parties' shared intentions about the beneficial ownership of the property, the court must consider the whole of the parties' relationship so far as it illumines their shared intentions about the ownership of the property.'

This move from Chadwick LJ's 'whole course of dealing in relation to the property' represents a signficant conceptual expansion and reflects one of the key changes recommended by the Law Commission's Report.

The Court of Appeal found that Miss Fowler's 'optional expenditure' constituted (with the exception of clothes for Miss Fowler) 'contributions to household expenses for which both parties were responsible.'

The division of the parties' purchasing habits was 'perfectly logical if, as I assume, [Miss Fowler] did most of the shopping for the children. The further inference that in my judgment it is appropriate to draw is that the parties intended that it should make no difference to their interests in the property which party paid for what expense. Those payments also throw light on their intentions in this respect. There was no prior agreement as to who would pay what. The inference from this . . . was that the parties simply did not care about the respective size of each other's contributions.'

With respect to the quantification of Miss Fowler's beneficial interest in the property, Arden LJ said 'it is obvious that in some cases there may be a thin dividing line between the case where the parties' shared intention is properly inferred to be ownership of the home in equal shares, and the case where the parties' shared intention is properly inferred to be that the party who has contributed less should have a smaller interest than the other.'

In Fowler, however, Arden LJ limited her reasoning in finding that Mr Barron had failed to displace the presumption that the beneficial interest in the property was divided in equal shares to stating that: 'the way that [Miss Fowler] used her own income indicates that the parties largely treated their incomes and assets as one pool from which household expenses will be paid [and] there is also important evidence about their [mutual] wills [which would indicate a shared understanding that the parties shared the beneficial interest in their assets equally].'

The Court of Appeal's judgment in Fowler gives little guidance as to what should properly be considered a 'very unusual' case. It may well not even become clear until there has been a 'full examination of the facts' such as Baroness Hale warned against in Stack.

Practitioners would be prudent, then, in advising a client on the prospects of success in a case where there is no evidence of discussion indicating a joint intention which does not reflect the way the legal title to a property is held, to exercise considerable caution.